Former Republican presidential candidate Mitt Romney will write-off the outstanding $45 million in loans he made to his campaign.  (See, e.g., Boston Globe, L.A. Times, Washington Post)  That is quite a chunk of change for Romney, given his estimated $190 – $250 million net worth.  Although not mentioned in any of the press reports I have seen, Ted Seto (Loyola-L.A.) raised the tax consequences of the write-off on the TaxProf Discussion Group.  Ira Shepard (Houston) delivered the bad news for Romney:  § 271 precludes any § 166 bad debt deduction “by reason of the worthlessness of any debt owed by a political party," which is defined to include a political campaign organization.

Alan Westheimer (Houston) then asked whether Romney could deduct the $45 million as § 162 job-seeking expenses.  Sarah Lawsky (George Wshington) noted that "§ 162(e)(1)(B) denies a deduction for ‘participation in, or intervention in, any political campaign on behalf of (or in opposition to) any candidate for public office.’ It may not, however be necessary to go as far as § 162(e). In McDonald v. Commissioer, 323 U.S. 57 (1944), decided before the language in § 162(e) was enacted, the Supreme Court held that campaign costs were not deductible business expenses. (A number of later cases follow McDonald.)  Kristin Gutting (Charleston) added:  "See Estate of Rockefeller v. Commissioner, 762 F.2d 264 (2d Cir. 1985). In Rockefeller, Nelson Rockefeller sought to establish that in seeking VP he was merely engaging in the same trade or business he was currently in ("an executive in federal and state governments" or "an executive in public office"). The court held that Rockefeller’s tasks and activities as VP were not the same as those associated with the other positions that he held. Therefore, the costs in seeking VP were not deductible."